The number of people in the UK using ‘open banking’ technology has reached one million, according to data released this week.
The Open Banking Implementation Entity (OBIE), which was set up by the Competition and Markets Authority (CMA) to oversee the development of real-time data links permitting bank account holders to share information with third parties, announced that user numbers had doubled in the past six months.
Since January 2018, the nine biggest current account providers in Great Britain and Northern Ireland – known as the ‘CMA9’ – have been required to allow customers to grant third parties access to banking data. One million such requests have now been made.
OBIE’s latest data shows that the UK now has 204 regulated open banking service providers, up from 100 at the end of 2018. UK open banking customers are generating more than 200 million ‘calls’ monthly, each representing a single data request made by a third-party provider to a bank or building society.
Open banking is also moving into payments. Last month, people made 50,000 payments from their current account through an app that is not their bank’s.
The UK’s progress update comes two years after the European Union’s revised Payment Services Directive, PSD2 – the driving force across Europe for open banking – came into effect. PSD2 aims to boost competition, security and transparency across the European payments landscape.
Ready for take-off in 2020?
“Open banking is about giving customers access to their data to rebalance the market in their favour,” said OBIE trustee Imran Gulamhuseinwala. “By creating greater competition, we are seeing innovation from new entrants and incumbents, which is leading to greater convenience and crucially greater engagement. We believe 2020 will be the year when adoption of open banking financial services really takes off.”
John Glen MP, economic secretary to the Treasury and City minister, said: “From better tracking of payments to stop customers getting overdrawn, to utilising data to improve access to finance, open banking has brought real improvements to the people and businesses using it. I’m looking forward to seeing even more people benefit from this new technology in the year ahead.”
Although take-up is growing, past media reports have referenced relatively low customer awareness of open banking: a year ago, the Financial Times referred to it as the ‘the quiet digital revolution’.
Among the touted benefits is its potential to address societal challenges such as financial inclusion. Lord Holmes of Richmond, who is vice-chair of the UK Parliament’s All-Party Parliamentary Group (APPG) on FinTech, and co-chair of the APPGs on the Fourth Industrial Revolution and Blockchain, told Global Government Forum: “While I’m pleased that open banking adoption has surpassed one million customers, my hope is that 2020 will be the year that open banking helps drive financial inclusion. There is great potential for open banking to provide banking services for those currently excluded and I look forward to greater adoption of services that, for example, offer greater access to credit, enable better budgeting, manage debt, automate savings, and make it easier to compare products.”
From open banking to open finance
Government authorities in the UK are also investigating the broader theme of ‘open finance’.
The Financial Conduct Authority (FCA) last month published a 38-page ‘call for input’ on the topic. Its document concludes by asking 22 questions such as whether there is a “natural sequence” by which open finance would or should develop by sector, and whether the current regulatory framework is adequate to capture the potential risks. The deadline for responses is 17 March 2020.
“The UK has led the way internationally in the development of open banking, which supports our objective of promoting effective competition in the interests of consumers,” the authority’s executive director of strategy and competition, Christopher Woolard, said. “As we look forward, we want to consider the potential benefits that could come from giving consumers and businesses control over a wider range of their financial data – so-called ‘open finance’.”
OBIE, whose trading name is Open Banking Limited, is funded by Allied Irish Bank, Bank of Ireland, Barclays, Danske, HSBC, Lloyds Banking Group, Nationwide, RBS Group and Santander. Its mandate includes designing the specifications for the APIs that banks and building societies use to securely provide open banking; creating security and messaging standards; and producing guidelines for open banking participants.